Self employed sole trader and CIS tax question.

[ProDave]

I'm a self employed sole trader and have been for 7 years, filling in my own self assessment tax return each year. Up until now always working directly for private individuals for all jobs including new builds, or companies for repairs, alterations and new builds.

However I have just completed my first new build working for a company building the building. so I find it falls under the CIS scheme.

So I have contacted HMRC and I'm now registered under the CIS scheme and understand the contractor will deduct basic rate 20% tax from my payment under the CIS scheme and they should provide me a statement of payment and tax deducted.

So my question, how exactly do I submit this on my next self assessment at the end of this tax year.

I presume I enter the payment in as part of my "income" (turnover) and any expenses such as travel etc goes under expenses on my self assessment.

I also assume that the tax that will have been deducted by the contractor I'm working for goes on my self assessment as "tax already paid" Is that correct.

But on my "income" do I enter the gross payment, or the net payment after tax? I assume the net payment otherwise it looks like I may be taxed twice if I enter it as gross payment?

The HMRC website makes mention of monthly CIS statements to them, but it also looks to me that is only for the contractors to sumbit tax paid and net payments paid to subcontractors. Do I as a sub contractor now have a burden of submitting a monthly statement of net receipts and tax paid? or do I just leave it all to put on my end of year tax return?

 

[mikep]

I have an accountantant that does that, all you do is show your gross amount then show all payments whicha have been paid on CIS4, they will take into account tax paid plus your expenditure on goods, travel, tools, clothing etc.

But to be honest get yourself an accountant he will save and claim for you and is worth the money, I am a sole trader with a ltd company so I draw

 

[ProDave]

So I just leave it until my end of year tax assessment and no need for monthly submissions?

I assume the monthly submission thing mentioned (even if the amount in a particular month is zero) is only for the prime contractor who is deducting the tax, and not for the sub contractor who is receiving the net payment after tax?

Does the CIS "tax deducted" go on the "expenses" column on my self assesment? or separately in the "tax already paid" box?

 

[Lee321]

yes monthly is if you've deducted tax from a payment to a subbie

tax already paid so if all year you did

 

[Evans Electric]

Hi ProDave ,

Main thing with this system (which,incidently, is absolute carp) is that you get all the statements from the builder, they are your only proof that tax has been stopped.

You then submit them as a claim to be deducted from your assessed tax.

Are you paying someone to help you, another spark or a mate ? Remember you will submit a CIS invoice to the builder where you have to show your labour figure and also your materials , the builder will deduct 20% from the labour figure and give you a statement to that effect.

If you are paying someone else , only show your own labour ,do not include your mate's or tax will be paid twice on it.

Only you are the sub-contractor to the builder ,no one else, so he only needs to stop tax on your earnings.

If,like me ,they send you a paying in book, you must send them in by the 5th of the month or they will fine you, same with monthly returns by the 19th or

 

[ProDave]

Thanks Evans.

In this case the builder concerned supplied all the materials (I gave him a shopping list at the start of the job) so I only charged him for labour. So he will deduct 20% of my total labour only invoice.

I don't and won't employ a sub sub contractor or mate, so I should not have the complication of being on the "other end" of the CIS scheme. Hopefully that will mean no need for me to file monthly statements.

I'm anticipating doing more work for this same builder in the future and will try and keep it on a labour only, no sub sub contractor basis to keep things simple.

And if I don't get a statement immediately stating the tax he has deducted I will chase him for it, just in case he goes AWAOL.

Thanks for the advice.

 

[Evans Electric]

Sounds good then , I've never met a builder I could fully trust , I don't think they exist .

 

[Sidewinder]

PEEPS,

REMEMBER THAT, DESIGN, TESTING, PROFESSIONAL SERVICES, INSPECTION & CERTIFICATION IS EXEMPT FROM CIS.

You should submit detailed invoices showing this then you cannot be deducted for that aspect.

IF that is you wish this to be the case.

I can refer you to HMRC info on this IF I can get the time!

ATB,

Paul

 

[philbas]

I am a sole trader with a ltd company

I hate to be pedantic but you cant be both, sole trader and limited company are two different beasts. From what you say I think you are a Ltd company.

A sole trader is liable for all debts, there is no difference between there private income and the company income, it's all stuck in the same basket. With a limited Company you are only liable for what you invested in the company.

 

[Lee321]

seriously keep on top of statements.

yes we don't like to rock the boat as it were relationship wise and this subject can seem to do just that. a good way is to blame your accountant that its them that are baggering you for them

 

[VoltzElectrical]

don't understand why you can't get the builder to pay you 'gross' then you can continue to pay less tax under the directorship of your limited company.

 

[Lee321]

don't understand why you can't get the builder to pay you 'gross' then you can continue to pay less tax under the directorship of your limited company.

he can if he's been a good boy tax wise in the past and he can prove his activity's are in line with those expected of a trading company

the builder is under strict guidance on what stoppages are made

 

[Evans Electric]

PEEPS,REMEMBER THAT, DESIGN, TESTING, PROFESSIONAL SERVICES, INSPECTION & CERTIFICATION IS EXEMPT FROM CIS.

You should submit detailed invoices showing this then you cannot be deducted for that aspect.

IF that is you wish this to be the case.

I can refer you to HMRC info on this IF I can get the time!

ATB,

Paul

Thanks, also Fire Alarm work if I remember correctly.

 

[Evans Electric]

don't understand why you can't get the builder to pay you 'gross' then you can continue to pay less tax under the directorship of your limited company.

It depends upon your annual turnover , can't remember the upper limit, just know I come nowhere near it. :|

 

[green-hornet]

PEEPS,REMEMBER THAT, DESIGN, TESTING, PROFESSIONAL SERVICES, INSPECTION & CERTIFICATION IS EXEMPT FROM CIS.

You should submit detailed invoices showing this then you cannot be deducted for that aspect.

IF that is you wish this to be the case.

I can refer you to HMRC info on this IF I can get the time!

ATB,

Paul

I think I will scoob you for that, I never even knew it was exempt, and most of the labour charges for which cis is taken out are the very same.

I may even try and do a claw back.

 

[Lee321]

good luck steve i think you'll find its industry standard practice.

even if hmrc back you up, large corporations will not be changing their ways anytime soon.

if your getting bigger and need cash flow which this deduction does impeed then just get contractor status and all payments will be gross

 

[wozz]

if your getting bigger and need cash flow which this deduction does impeed then just get contractor status and all payments will be gross

could you explain this bit to me?

 

[Lee321]

when your bigger as a company and your turnover is a certain level and above you can apply to the tax man to become a main contractor and as long as you've had no bad tax issues in the past and meet the turnover threshold then you'll get payments gross without any deduction

 

[wozz]

i never knew that. I doubt i would reach the level anyway. I wish it could be like that as i get stoppped 20% of the whole amount including the subbies wages so i end up loosing more i think??

dont really understand it all as accountant does it. just ****es me off when u put in a price and when it comes to payment you then get 'can i have your cis number' 'well u could of told me that before i priced it'!!!!!

 

[Lee321]

the deduction has no bearing on your price/turnover/profit

the deduction suffered for the subbie/s you have is off set